International Trade Committee on March 10th, 2008

[David Plunkett]

We have a highly developed, sophisticated Trade Commissioner Service that is in many countries around the world, but obviously in Oslo in this case. We have been in communication with them for the last couple of years on this very subject, because the one thing that was made very apparent to us during our many consultations with the industry is that they had a concern about this whole subsidy issue. We specifically went chasing our post and asked them to sniff into it as much as they could. There are obviously links to our colleagues in Geneva because of the WTO. As my colleague here reminded me, there are also links in terms of the OECD.

So we have a number of areas of people, including our sectoral specialists in our department and Industry Canada, who will keep an eye on this. Trust me, I have no doubt that if there were even a sniff of Norway introducing programs that people thought were offside, we would hear about it very quickly.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Temelkovski.

Monsieur André.

[Guy André, Bloc, Berthier—Maskinongé, QC]

Welcome. I have a few questions.

You know that the Davie shipyard was bought up by a Norwegian company that presently operates this shipyard here, in Quebec. Under this bilateral agreement, Davie could continue to operate and even expand, modernize and develop its market in North America. But under this agreement, the new company could also use its shipyards in Norway and simply consolidate all its production in Norway and continue to serve the North American market. In other words, it could close its shipyard in Canada and expand its operations in Norway.

Is this a possibility that you considered?

On another subject, you said there was protection for the supply managed sectors which are very important for Quebec and the rest of Canada. Does this agreement deal in any way with the imports of milk proteins? There has been a pretty major dispute with the United States in this regard. Is this protected under the agreement?

I am somewhat surprised to hear you say that the evaluation of the shipbuilding industry, in terms of job losses... Quebec has some pretty large companies in this sector: Verreault Navigation, Davie, etc. Has there been an assessment done by the shipbuilding industry or by the government, as was done for the Canada-Korea agreement? As you know, in the case of the Canada-Korea agreement, the automobile industry did a very comprehensive assessment of the impact that agreement could have on this sector. The government also did an assessment. We can get from Industry Canada the evaluations that were done on the impact of this agreement.

Has there been at least a summary assessment of the impact of this agreement on employment in the shipbuilding industry? You seem to say there was none. I reiterate that Davie could centralize its operations in Norway and close its shipyard in Quebec, or vice versa.

[Frédéric Seppey]

Thank you for this question.

With regard to milk protein concentrates, I can assure you that the agreement does not deal in any way with tariff line 3504, milk protein concentrates. Canada made sure that this tariff line was excluded from the negotiations. Canada did not undertake any obligations in this regard. Its obligations regarding milk protein concentrates are only governed by the WTO agreements. No other obligation has been added.

[Guy André, Bloc, Berthier—Maskinongé, QC]

It is not included in the agreement.

[Frédéric Seppey]

Yes, it is totally excluded.

[Guy André, Bloc, Berthier—Maskinongé, QC]

So it is not excluded.

[Frédéric Seppey]

It is excluded from the agreement.

[Guy André, Bloc, Berthier—Maskinongé, QC]

But there is the WTO agreement.

[Frédéric Seppey]

We are presently amending tariff concessions under the WTO in terms of those procedures governed by article 28. We are presently negotiating in order to establish a tariff quota. However, this free trade agreement does not cover these products. Consequently, a country like Switzerland, which is an important player in the milk protein concentrates market, for example, did not gain any new rights under this agreement. Like supply management, this was excluded form the negotiations and consequently the agreement does not change the terms of trade in this area.

[Guy André, Bloc, Berthier—Maskinongé, QC]

Thank you.

[David Plunkett]

On the question about the economic assessment, I am not aware that we have conducted a formal economic impact analysis of any specific sector in the course of this period. But as far as the ships area is concerned, we believe we understand very well the concerns of the industry. As I said earlier, this is one area where we consulted with the industry throughout the entire period, and certainly very extensively toward the end of the negotiations, to make sure we had a good sense of what was in play so we could take their concerns into account.

Davie is an interesting example that you've brought up. I stand to be corrected by my colleagues, but my understanding is that the shipyard in Davie was very close to going into receivership, or whatever one does with a shipyard when it's having difficulties. As a result of this Norwegian investment, they have recently reopened and have orders for three offshore vessels valued at approximately $410 million U.S. for delivery to a Norwegian firm beginning in late 2008.

While this agreement does not have any substantive provisions about investment, I think it's a very positive sign. It's a reflection of the state of the economy and the investment climate Canada offers that a company from offshore came in, saw an opportunity, and took advantage of it to keep the Davie yard up and operating. It's now certainly in better shape than it was before this investment.

I can't predict the long-term future of an investor; these are private sector decisions. But based on the facts I know, you have a positive step here that is keeping this yard very much alive and well, and I think that's good news for people.

[Guy André, Bloc, Berthier—Maskinongé, QC]

In your discussions with Davie, did you not get a sense that operations could be more centralized in Norway to make use... Did you see anything that would lead us to believe that this company might consolidate its operations in Norway? You have had discussions, you worked collaboratively and there has been close consultation between you and the shipbuilding companies of Quebec and Canada. Was there nothing that might lead us to conclude that this company will want to expand more in Norway or in Canada in order to develop its business?

[David Plunkett]

I was not party to any specific discussions about Davie's plans one way or another. But in reading the information I have here that my colleagues pulled together, if they're looking to produce offshore vessels at the yard in Quebec for delivery to a Norwegian firm, that seems to be good news for the firm. I don't know the details of this, because it's a private sector decision.

[Guy André, Bloc, Berthier—Maskinongé, QC]

I have one last question for you. Under this agreement, an adjustment period of 15 years was negotiated in order to allow our shipbuilding industry to adjust to the competition with Norway. If the government does not put into place programs to support and modernize our shipbuilding industry here, in Quebec and in Canada, do you believe this agreement could become futile if we do not make good use of those 15 years it provides?

[David Plunkett]

I think that sort of questioning is beyond my remit for this committee. I can tell you what we have agreed to, but you're starting to drift into some subject matter that I'm a bit uncomfortable trying to predict.

[Guy André, Bloc, Berthier—Maskinongé, QC]

But according to you we should make use of these 15 years to support our industry, to allow it to modernize and become more competitive in the overall market. This is the goal of this agreement.

[David Plunkett]

As I said, I can tell you that we have given, through the negotiations, an extremely generous transition period to the industry. I can also suggest that in terms of the broader context of the shipbuilding policy more generally, you would be best placed to talk to our colleagues in Industry Canada, who have a much more comprehensive understanding of the sector than I will ever have, and to hear how they see all of this fitting together.

[The Chair, Conservative, Lee Richardson]

That's 10 minutes. Thank you, Monsieur Cardin.

Mr. Miller, you have 20 minutes.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Thank you very much, Mr. Chairman.

Thank you to the witnesses for being here today. Regarding some of my questions on the shipbuilding industry, I certainly feel a lot better; and after hearing a lot of that, I'm sure the other witnesses will too.

Something that I think needs to be pointed out is that these negotiations have taken a period of time covered by three different governments. I think some of the critical comments made to the negotiating team are certainly off base.

I'd like to congratulate Mr. Plunkett and his team for the great job they are doing. Obviously they have nothing to gain by not getting the best deal possible for Canada. We can't go and cherry-pick industries; we have to get a deal that's good all the way around. And the more I delve into this, the more I think you've done a good job.

One area you touched on earlier was agricultural products. I believe it was Mr. Seppey who used butter as an example. I take it that most of the non-agricultural tariffs were reduced to zero, but that some agricultural products were maybe excluded from the negotiations altogether. I was wondering if you could give some examples on both sides of agricultural products that may have been taken out.

I don't know who wants to speak to that.

Mr. Seppey.

[Frédéric Seppey]

Thank you for your question, Mr. Miller.

Yes, there are a number. It's complex because in the area of agriculture, the negotiations resulted in a very curious structure. As Mr. Plunkett explained, there are three agreements governing trade in agriculture, and the concessions given to Canada by each of the EFTA countries differ. For example, Switzerland had an interest in getting more access to our cheese market, or better tariff treatment, I should say, of gruyère or emmenthal cheese. Well, the condition for them to get concessions from us within the in-quota rate--that is, the tariff rate applicable to the small volume that we allowed in--was that they would not grant export subsidies. While Switzerland was ready to constrain their cheese producers by not giving them export subsidies, Norway was not ready to do the same thing. Therefore, cheeses are covered in the agreement with Switzerland, but not in the one with Norway.

On the offensive side, or on exports—

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

If I could stop you there, just to be clear on this, some products in this agreement—even though it's for a country—will then be exchangeable from country to country, but maybe not in another one. Was I clear on that?

[Frédéric Seppey]

Yes, that's correct, sir.

To give you an example on the other side--that is, items of export interest--it was very important for our exporters to Switzerland to get access on horsemeat and durum wheat. So we have worked hard to get concessions from Switzerland, for example, on those products. In Iceland, it was very important for our producers of frozen french fries in New Brunswick to get access. We managed to negotiate concessions with Iceland, where the tariff was cut by half from 76% to 46%.

So the gains in each of the countries vary. For example, in Switzerland, it's durum wheat and horsemeat that are the big winners. In Iceland, it's frozen french fries. In Norway, it is durum wheat and frozen blueberries, where there have been very high tariffs, but we have managed to obtain significant reductions.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Overall, Mr. Seppey, would you say this was a real winner for Canadian agriculture?